Mumbai, Oct. 11: The collective burden of home loan borrowers will go up by Rs 6,000 crore annually as banks and housing firms raised their interest rates several times in the past 12 months in response to the monetary tightening by the RBI since March 2010.
According to a report from Crisil Research, the EMI burden on home loan borrowers could jump from April as interest rates on teaser loans get reset to the market rates.
Teaser loans, which were popularised by the State Bank of India, have a fixed and lower rate of interest for the first two to three years. After this period, they are pegged at market rates that are higher.
The RBI has raised the key rates 12 times since March to tame inflation, forcing banks and home loan financiers to pass on the burden of their increased borrowing costs.
The reference floating rate has gone up by 200 to 250 basis points during this period, translating into an average increase of 15 per cent in EMIs.
With interest rates rising, Crisil Research said EMIs rose for 40 per cent of existing floating rate customers. The rest chose to increase their tenures or made a part payment. According to its estimates, customers paying higher EMIs now face an estimated additional annual burden of around Rs 3,500 crore. This excludes the teaser loan schemes which accounted for 25 per cent of the housing loan portfolio of Rs 5,10,000 crore.
Once interest rates get reset to prevailing market rates from April, we estimate an additional EMI burden of Rs 2,000-2,500 crore annually on this account, it said.
But the rate hikes will hurt the lenders and they will have to wrestle with the problem of rising bad loans. Crisil said non-performing assets (NPAs) might increase because of a steep rise in the interest outgo for borrowers coupled with the economic slowdown. This is because an increase in monthly payments is not commensurate with the growth in income levels and the instalment to income ratio has risen for a home loan borrower.
While the quarter ended June 30 showed asset quality of industry players such as HDFC, LICHFL and DHFL deteriorating by 10 to 40 basis points sequentially, Prasad Koparkar, head (industry and customised research), Crisil Research, said, The NPA levels are expected to go up around 30 basis points to reach 1.9 per cent by March 2013. However, losses on this account are expected to increase only marginally.
At the same time, yields for the financiers are expected to improve in 2012-13 as teaser loans taken in 2009-10 get reset to market rates.